CAIRO, April 13 -- The International Monetary Fund ( IMF)'s latest report forecasted that Egypt's gross domestic product (GDP) growth will score 2.3 percent in 2014, a little higher than last year's 2.1 percent, and 4.1 percent in 2015.
Egyptian economists see the recent IMF remarks as a signal of potential economic improvement in Egypt despite its ongoing economic hardship that resulted from three years of disorder over the ouster of two presidents.
The ailing economy of the most populous Arab country is reflected in a budget deficit of about 34 billion U.S. dollars (14 percent of the GDP), the declining foreign currency reserves (from 36 billion dollars in January 2011 to 17.4 billion dollars in March 2014), an alarming unemployment rate of 13 percent, and an inflation rate of over 12 percent besides deteriorating tourism and foreign investments.
"The IMF positive attitude is still based on the practical steps made by the newly-appointed interim government that started to halt energy subsidies to large plants and factories that would save the country more than 5.7 billion dollars," said Rashad Abdo, economics professor at Cairo University and also head of the Egyptian Forum for Economic and Strategic Studies.
The government is studying on lifting energy subsidies represented in power supply and oil products provided to steel, cement, ceramics and other plants to save funds for dealing with the budget deficit, the recurrent power outages and the gas shortage.
The IMF also sees that lifting energy subsidies is a key factor in Egypt's economic reform program to overcome the ongoing difficulties.
"Besides energy subsidies, the new government is reducing national bank interest rates by about three percent, which would also save the country more than five billion dollars," Abdo said. Such steps would reduce the budget deficit that is targeted to improve from 14 percent to ten percent by the end of this fiscal year.
"The previous government just attempted to cool down the people, while the current one seems to be more earnest and practical," Abdo added.
As Egypt is heading towards presidential elections in late May, the economic expert said that anticipated political stability would in turn improve security, attract foreign investors and tourists, and provide more job opportunities, "which are key factors for economic recovery."
Hamdy Abdel-Azim, economics professor at Sadat Academy and member of Economy and Legislation Association, echoed Abdo's view that IMF's positive remarks were motivated by the keenness of the current government to face challenges via a thorough economic reform program including lifting energy subsidies provided to large plants.
He added that the improving security situation and potential political stability after the upcoming presidential elections are among the good signs of possible economic improvement.
According to the new constitution, the government will dedicate ten percent of the new budget, to be announced on early July, for improving healthcare, education, scientific research and universities.
"An earnest government on economic reform and relative stability are positive signs for prospect foreign investments and tourism recovery, and hence for potential economic growth and improvement of Egypt's declining credit rating," Abdel-Azim said, adding that the above is behind IMF's confidence in Egypt's gradual economic improvement.
Egypt is suffering foreign debts of about 46 billion dollars. It received about 12 billion dollars in six months from supporting Gulf States, including the United Arab Emirates, Saudi Arabia and Kuwait. The domestic debts owed by the government through offering treasury bonds have also reached an alarming level of about 229 billion dollars.
Experts believe that Egypt does not need IMF loans, as it still has more than 17 billion dollars in reserves at the Central Bank.
"More loans mean more financial burdens and interests that would negatively affect the balance of payments and the value of the Egyptian pound versus foreign currencies," Abdel-Azim warned.
The economic expert showed optimism that future stability would replace the financial aids with foreign investments, which would not cost the state financial obligations or economic slowness.
"This is all based on completing the country's political future roadmap, that would restore security and stability, and hence foreign investments and tourism," he said.